Activist investor Knight Vinke has publicly rejected an improved offer for mining company Xstrata from commodities trader Glencore, which is expected to release further details of its now-hostile £56bn takeover proposal at 7am on Mondaymorning, with a full offer document to follow at a later date.

It will be the latest twist in a long-running mega-deal that began as a friendly merger of equals, turned sour over accusations of excessive rewards for management, and has prompted interventions from both the Qatar state and former prime minister Tony Blair.

In an announcement to the London Stock Exchange, where both companies are listed, Glencore will flesh out the new terms that its chief executive Ivan Glasenberg put to both his and Xstrata's shareholders in an 11th-hour intervention on Friday.

It is understood this will not constitute a firm takeover offer or start the clock ticking on a new deadline in the process. Takeovers must be approved within 60 days of an offer being made, according to UK Takeover Panel rules.

The new terms offered by Glencore included an increase in the offer price from 2.8 shares in the new company for each existing Xstrata share to 3.05 shares, and controversially the removal of a promise to make Xstrata boss Mick Davis chief executive of the merged group.

In a statement released on Sunday night, Knight Vinke rejected Glencore's improved price, saying "the value of Xstrata is substantially more than Glencore is proposing today". The mining company is due to generate a threefold increase in earnings over the next two years, the only one of its peer group to have such a growth profile, argued David Trenchard, vice chairman of Knight Vinke, which is a top 20 Xstrata shareholder with just under 0.7% of the stock.

Trenchard also called for a "substantial increase" to the price, offered and an "appropriate premium" given Glencore's offer has changed from a merger to a takeover, with a corresponding management overhaul, and now represents a change of control at Xstrata. Another Xstrata shareholder, Richard Buxton of fund management group Schroders, has already rejected the terms, saying "the price is absolutely still too low".

Glencore's new offer came on the day the boards of both companies had gathered in the Swiss town of Zug to vote on the deal, and at the very moment Xstrata's directors were due to take their seats.

Xstrata and its key 12% shareholder, the Qatar sovereign wealth fund, are understood to have been surprised by Glencore's stipulation that Davis would no longer lead the merged company as originally proposed. The Qataris are understood to be supportive of the mining group's successful management team.

Blair was asked to intervene after it became clear Qatar would lead other Xstrata shareholders in blocking the merger on the grounds that Glencore's offer was too low. In a meeting at Claridge's hotel on Thursday night, Blair is understood to have mediated discussions well into the night between Glasenberg, the Qatari prime minister Sheikh Hamad bin Jassim al-Thani, and their advisers.

The Qataris had in June demanded an offer of at least 3.25 merged company shares for each Xstrata share, but Glencore improved its offer and their stance softened.

The new offer of 3.05 shares in the new companyrepresents a 17.6% premium to the miner's share price on 1 February before the merger plans were announced.

However, in a statement released from Zug on Friday, Xstrata said the terms also required the replacement of Davis as leader of the merged group and an amendment to £200m of 'management incentive arrangements' that were due to be paid to more than 70 of the miner's executives in exchange for staying with the new company.

In a proposal that irked shareholders at both companies, Davis had been due to receive as much as £75m in retention money, with a further £144m set aside for his top team.